VIKRANT KSHIRSAGAR

TY BBA(IB) C

278

ASSIGNMENT 5

PORT LOGISTICS

Write a short note on Sagarmala project.

The concept of Sagarmala was approved by the Union Cabinet on 25th March 2015. As part
of the programme, a National Perspective Plan (NPP) for the comprehensive development
of India’s 7,500 km coastline, 14,500 km of potentially navigable waterways and maritime
sector has been prepared which was released by the Hon’ble Prime Minister, on 14th April,
2016 at the Maritime India Summit 2016.

Need for Port-Led Development in India

India is one of the fastest growing large economies in the world with a GDP growth rate of
7.3% in 2018-19 and ports play an important role in the overall economic development of
the country. Approximately 95 % of India’s merchandise trade (by volume) passes through
sea ports. Many ports in India are evolving into specialized centres of economic activities
 and services and are vital to sustain future economic growth of the country such as JNPT,
Mundra Port, Sikka Port, Hazira Port etc.
However, Indian ports still have to address infrastructural and operational challenges before
they graduate to the next level. For example, operational efficiency of Indian ports has
improved over the years but still lags behind the global average. Turnaround time (TAT) at
major ports was approximately 2.5 days in 2018-19, whereas global average benchmark is 1-
2 days. Some of the private sector ports in India like Mundra and Gangavaram, have been
able to achieve a turnaround time of around 2 days.
Secondly, last mile connectivity to the ports is one of the major constraints in smooth
movement of cargo to/from the hinterland. Around 87% of Indian freight uses either road or
rail for transportation of goods. A significant share of this cargo experiences “idle time”
during its transit to the ports due to capacity constraints on highways and railway lines
connecting ports to production and consumption centers. Although water-borne transport is
much safer, cheaper and cleaner, compared to other modes of transportation, it accounts
for less than 6% of India’s modal split. By comparison, coastal and inland water
transportation contribute to 47% of China’s freight modal mix, while in Japan and US, this
share is 34% and 12.4% respectively. Significant savings can be achieved by shifting
movement of industrial commodities like coal, iron ore, cement and steel to coastal and
inland waterways.

Mode of Transportation Transportation Cost (Rs/Ton-Km)

Road 2.0-3.0

Rail 1.2-1.5

Waterways 1.1-1.2

Pipelines 0.1-0.15

However, more than 90% of coal currently moves via railways. The constraints on
connectivity and sub-optimal modal mix results in higher logistics cost thereby affecting the
manufacturing sector and export competitiveness
The third factor is the location of industries / manufacturing centres vis-à-vis the ports.
While cost differential between India and China is not significant on a per tonne km basis,
China still has a lower container exporting cost, than the cost in India, due to lower lead
distances . Presence of major manufacturing and industrial zones in coastal regions in China,
which were developed as part of the Port-Led Policy of the government is the main reason
for lower lead distances
Any programme for port-led development needs to consider the above mentioned factors
to effectively harness the potential of India’s long coastline.

Concept and Objectives:

Vision of the Sagarmala Programme is to reduce logistics cost for EXIM and domestic trade
with minimal infrastructure investment. This includes:
 Reducing cost of transporting domestic cargo through optimizing modal mix
 Lowering logistics cost of bulk commodities by locating future industrial capacities
near the coast
 Improving export competitiveness by developing port proximate discrete
manufacturing clusters
 Optimizing time/cost of EXIM container movement

Components of Sagarmala Programme are:

 Port Modernization & New Port Development: De-bottlenecking and capacity

expansion of existing ports and development of new greenfield ports
 Port Connectivity Enhancement: Enhancing the connectivity of the ports to the
hinterland, optimizing cost and time of cargo movement through multi-modal logistics
solutions including domestic waterways (inland water transport and coastal shipping)
 Port-linked Industrialization: Developing port-proximate industrial clusters and
Coastal Economic Zones to reduce logistics cost and time of EXIM and domestic cargo
 Coastal Community Development: Promoting sustainable development of coastal
communities through skill development & livelihood generation activities, fisheries
development, coastal tourism etc.
 Coastal Shipping & Inland Waterways Transport: Impetus to move cargo through
the sustainable and environment-friendly coastal and inland waterways mode.
What is marine insurance and where can one obtain it India?

A simple definition of the word insurance would be “Protection against future loss.”  Marine
insurance is another variant of the general term ‘insurance’ and as the name suggests is
provided to ships, boats and most importantly, the cargo that is carried in them.

Marine insurance is very important because through marine insurance, ship owners and
transporters can be sure of claiming damages especially considering the mode of
transportation used. Of the four modes of transport – road, rail, air and water – it is the
latter most which causes a lot of worry to the transporters not only because there are
natural occurrences which have the potential to harm the cargo and the vessel but also
other incidents and attributes which could cause a huge loss in the financial casket of the
transporter and the shipping corporation.

Incidents like piracy and possibilities like cross-border shoot-outs also pose a major threat
when it comes to water transportation and therefore in order to avoid any loss because of
such events and happenings, in the interest of the corporation and the transporter, it is
always beneficial to have a back-up like a marine insurance.

Another important aspect of having marine insurance is that a transporter can choose the
insurance plan as per the size of his ship, the routes that are taken by his ship to transport
the cargo and many such minor points which could go a great length in affecting the
transporter majorly.

Also, since there are various plans and policies which indicate about covering not just the
cargo but also the vessel, the transporter can choose and avail of the best policy that suits
his business the best.

However, as much as marine insurance provides fair claim to transporters and corporations,
it has to be understood that marine insurance is also one of the trickiest and strictest
insurance areas right from the time the concept of marine insurance commenced – i.e. from
the 17th century onwards.

While dealing with the scope and range of marine insurance, it is very important that a
ship’s captain follows a rigid protocol in terms of the route taken and the time taken for the
cargo and the vessel to reach the intended port of destination. Because if there is any
discrepancy or violation in terms of the route taken, i.e. if the captain varies or digresses in
his route from the one originally intended as a part of the ship’s course, then even if there is
any mishap occurring to the vessel or the cargo, the insurance claim will be rejected
completely without any possibility of the claim being reimbursed to the claimant at some
future date after a few tough negotiations.

Therefore it becomes very important that a ship’s captain takes due consideration about the
prescribed routes so as to avoid a failed insurance contract because of an unplanned loss
due to the deviation in the route. This would bring about not just caution on the part of the
captain but would also reduce the possibility of losing important insurance claims because
of inadvertence and negligence.

Marine insurance is a safe haven for shipping corporations and transporters because it helps
to reduce the aspect of financial loss due to loss of important cargo. Also, it helps to bring
about to the transporting companies and to the receiving parties, the duty, dedication and
the straightforwardness of the insurance companies.

Importance of Marine Insurance in India

Marine insurance online has its exceptional importance. Given that a marine insurance
ensures transporters and ship owners of claiming damages particularly considering the form
of transportation that is used - marine insurance has its unique importance. There are four
modes of transport systems that are used worldwide – road, rail, air and water. Out of these
four means of transport systems, water causes a lot of worries to the transporters not only
for the reason that there can be various unforeseen natural occurrences that can potentially
damage or harm to the vessel or cargo but also because of many other unforeseen
attributes and incidents that could cast a huge loss or damage in the financial chest of the
shipping corporation or the transporter.

To avoid all such circumstances, it’s very much important to secure whatever marine or
similar organization you run. Marine insurance policies help you battle with the huge
amount of loss that you could suffer.

Where to obtain a marine insurance in India:

In India, there are various major banks and financial institutions which provide marine
insurance. Some of the top providers are Bharti AXA, ICICI Lombard, New India Assurance
Co. Ltd., United India Assurance Co. Ltd., Tata AIG, HDFC ERGO, Royal Sundaram, Chola
Insurance, etc and also provides a variety of marine insurance such as:

•Hull Insurance: This type of marine insurance policy is mainly taken out by the owner of the
ship to keep away from any loss to the vessel in the event of any occurrence of unanticipated
mishaps. Hull insurance mainly caters to the hull and body of the vessel along with all the
pieces and articles of furniture on the ship.

•Machinery Insurance: This marine insurance policy covers all the essential machinery and
also compensates claims in case of any operational damages (subject to post survey and
approval by the surveyor).

•Liability Insurance: Liability insurance is a kind of marine insurance policy where

compensation is required to be supplied to any accountability taking place owing to a ship
colliding or crashing and by reason of any other persuaded attacks.
•Freight Insurance: This is a marine insurance policy that is designed to provide fortification
to the merchant vessels’ corporations that stand in a chance of losing money in the form of
freight in case of the cargo being lost as a result of the ship meeting with an unexpected
accident. Freight insurance is a type of marine insurance that helps with problem-solving of
companies’ losing money as a result of a small number of unprecedented events and
accidents occurring.

•Marine Cargo Insurance: Marine cargo insurance policy caters exclusively to the marine
cargo carried by ships. This policy is also pertaining to the possessions of a ship’s voyages.
This marine insurance policy safeguards the cargo owner against loss or damage of the
cargo in case of a ship accident or in case of delay in the voyage or unloading. Marine cargo
insurance has third-party liability coverage that covers the damage to the port, ship or other
transport forms (truck or rail) consequence from the hazardous cargo carried by them.

However, Marine Insurance Policy Exclusions are:

 Routine wear and tear or ordinary leakage

 Incorrect and inadequate packaging of goods being transported.
 Damage caused due to delay.
 Damage caused wilfully or intentionally.
 Damage caused due to civil commotion, strikes, war, riot, etc.
 Any damage or loss occurring due to bankruptcy or financial default of the owner of
the transport vessel

A Marine Insurance covers a wide range of possibilities, such as:

 Import or export shipments.

 Goods which are being transported via sea, rail, air, road or post.
 Goods being transported by coastal vessels which ply between different ports inside
the country.
 Goods which are transported via vessels plying along rivers.